Cap S.a. · BCS:CAP
Cap — Deutsche Bank 4th Annual Chile Conference (May 2014)
42 slides from Cap's conference presentation, May 2014
Slide 1: CAP Group Update - Deutsche Bank 4th Annual Chile Conference
CAP GROUP UPDATE Deutsche Bank 4th Annual Chile Conference Fernando Reitich President & CEO Raúl Gamonal CFO London - May 2014
Slide 2: Agenda
Agenda 1
Slide 3: Ownership structure
Ownership structure Mitsubishi Pension Invercap Other Corporation Funds 19,3% 8,7% 31,3% 40,7% 47,32% 52,68% 75,0% 99,9% 25,0% Compañía Minera Compañía Siderúrgica Novacero del Pacífico Huachipato 50,93% 30,56% 11,03% Cintac 57,79% Intasa Iron Ore Mining Steel Production Steel Processing Source: CAP
Slide 4: Integrated Operations
Integrated Operations Integrated operations Mining Steel Steel Processing • Production capacity: 15 • Production: 0.7 Mt/y • Production capacity:400 Mt/y • Nominal capacity: 1.45 kt/y • Only large-scale iron ore Mt/y • Leading steel processor producer in Chile • Focus on grinding in Chile • On track
Slide 5: Iron ore mining - Cerro Negro Norte Mine
Iron ore mining Cerro Negro Norte Mine 4
Slide 6: Mining sites
Mining sites Mining sites El Laco Punta Totoralillo Port CAP Mining has three Cerro Negro Norte different areas of operation Desalination Plant Copiapó in the north of Chile, Magnetite Plant located around the cities of: • La Serena • Vallenar • Copiapó Los Colorados Guacolda II Port Cities Vallenar
Slide 7: Mining products
Mining products BF and DR Pellets (Fe 65% - 66%) Lumps (Fe 62%) Pellet Feed (Fe 67% - 68%) Fines (Fe 62%) 6
Slide 8: Los Colorados Mine
Los Colorados Mine 7
Slide 9: Mining property
Mining property Ranking 2012 Hectares in exploration concessions - Chile N° Company Hectares % 1 BHP Chile Inc. 2,219,500 12.38 2 Codelco 969,400 5.41 3 Antofagasta Minerals S.A. 736,800 4.11 4 Teck Exploraciones Mineras Chile Ltda. 728,600 4.07 5 CAP 609,400 3.4 Ranking 2012 Hectares in exploitatio
Slide 10: Resources and reserves of magnetite ore
Resources and reserves of magnetite ore As a result of continued successful exploration campaigns, iron ore resources have increased progressively over the years, reaching 6,350 million tons in 2013 Total Mineral Resources Mine / Deposit Reserves (2) (1) Mine Location Ton Grade (% Fe) Ton Grade (% F
Slide 11: Mining shipments and markets
Mining shipments and markets Shipments 14.000 12.246 12,086 12.000 11.469 10.145 10.213 10.000 8.000 7.251 Th. MT 6.000 4.000 2.000 0 2008 2009 2010 2011 2012 2013 Shipments by markets and products (CY 2013) Self - fluxing DR H&L Lumps; 8% pellets; 14% Indonesia; pellets; 4% Sinter feed; 8% Bahrein;
Slide 12: Cash cost curve
Cash cost curve Global production cost • CAP Mining is a low cost producer of high grade magnetite concentrate • Mine depletion will lead to higher demand for high grade pellet feed • Environmental and economic constraints support the increased need for magnetite concentrate Pellet feed global produ
Slide 13: Magnetite pellet feed production 2013
Magnetite pellet feed production 2013 Country Market Production (Mt) Australia Seaborne 11 Canada Seaborne 14 Chile Seaborne 6 China Domestic 83 Kazakhstan Domestic 8 Mauritania Seaborne 3 Peru Seaborne 5 USA Domestic 1 Total 132 Magnetic pellet feed global production cost Source: CAP Minería 12
Slide 14: Steel
Steel
Slide 15: Steel focus on long products only
Steel focus on long products only • Reorganization of the plant to produce 700 kt/y, operating with only one blast furnace • Strong adjustment in its industrial processes and workforce • Long products demand underpinned by domestic construction and mining sectors CAP Acero Shipments and prices Talca
Slide 16: Steel processing
Steel processing 15
Slide 17: Steel processing
Steel processing • Main flat steel importer of the Pacific coast of South America • Creates value-added solutions for the construction, industry and infrastructure sectors in Chile, Peru and Argentina • Chile is LATAM´s most intensive user of steel in construction Shipments and prices Sales by Secto
Slide 18: Agenda
Agenda 17
Slide 19: Short-term growth in China
SteelShort-term Processing growth Short-term – Key considerations growth in in China China • GDP growth reached 7.7% in year 2013 • Growth lead by domestic demand should continue, even though fixed assets investment slows • This divergent development will continue in 2014 Expected 7.5% YoY GDP growt
Slide 20: Demands of the Chinese urbanization and development process
Demands of the Chinese urbanization and development process Taller buildings… More cars… Expressway construction investment Urban rail transit construction Source: Citi, April 2014 19 19
Slide 21: Iron ore quality evolution
Iron ore Iron ore quality evolution evolution • Crude iron ore grade is dropping • Mine depletion will lead to higher demand for high grade concentrates Production from Magnetite key CISA Chinese iron ore producers (Mt) concentrate 70 68 Average grade of hematite fines 66 (Pilbara, Australia) 64 62
Slide 22: Preference for higher quality iron ore
Preference for Preference for higher higherquality qualityiron ironore ore Relative price performance of ores of different grades SOURCE: Macquarie, commodities research 21
Slide 23: Global steel demand growth
Global steel demand growth • Global apparent finished steel demand will grow from 1.5 bn tons in 2014 to 1.7 bn tons by 2018 (implied 3% CAGR) (1) Other Developing includes CIS, MENA, Sub-Saharan Africa, Latin America, India, and Other Asia SOURCE: WSA; McKinsey Steel Demand Model Oliver Ramsbottom,
Slide 24: Global steel capacity utilization
Global Globalsteel capacity steel utilization capacity utilization • Nevertheless, world capacity utilization has been below 80% for the last 5 years, thereby practically destroying the margins of the steel production industry • Most of the excess capacity is concentrated in China. Current efforts t
Slide 25: Agenda
Agenda 24
Slide 26: CAP – Financial evolution
CAP – Financial evolution USD Million 2008 2009 2010 2011 2012 2013 Sales 1.972 1.375 1.994 2.787 2.470 2.297 EBITDA 534 128 740 1.184 764 708 EBITDA Margin 27,1% 9,3% 37,1% 42,5% 30,9% 30,8% Net Income 291 25 590 442 234 184(1) Cash 379 393 981 883 711 309 Gross Financial debt 880 907 1.001 628 719
Slide 27: EBITDA contribution by business
EBITDA contribution by business 100% 97% 98% 94% 94% 80% 77% 60% 40% 18% 20% 6% 6% 8% 5% 4% 0% 0% 2009 2010 2011 2012 2013 -3% -2% -2% -20% Iron Steel Steel Processing (1) EBITDA: Gross Margin – S&AE + Depreciation and Amortization + Dividends received in cash, over the last twelve months 26
Slide 28: Agenda
Agenda Agenda 27
Slide 29: Mining future prospects
Mining future prospects El Laco Punta Totoralillo Port Project Production Est. Capex Mt MUS$ Cerro Negro Norte Desalination Plant Copiapó Magnetite Plant 1 PF 110 Magnetite Plant Expansion 6,5 PF 1,700 Tofo 13,5 PF 2,900 6 PF 1,600 Alcaparra 135 Kt Conc-Cu 300 Los Colorados Los Colorados 4 SF 500 Gu
Slide 30: El Tofo
El Tofo Investment (E) : 1,700 – 2,900 MUS$ • Greenfield Production: 6.5-13,5 Mt/y of pellet feed Stage: Conceptual engineering Volume Fe Resources [Mt] [%] Measured 946 25.5 Indicated 455 23.4 Inferred 190 22.5 Total 1,591 24.5 0 200 400 m 29
Slide 31: Alcaparra iron/copper
Alcaparra iron/copper Iron ore body Investment (E): 1,600 + 300 MUS$ Production: 6 Mt/y of pellet feed Simbology Topography 135 kt/y of copper concentrate Drilling Fe% ≥ 45 Stage: Advanced exploration 25 ≥ Fe% < 45 Exploratory metallurgy 15 ≥ Fe% < 25 10 ≥ Fe% < 15 Núcleos Estéril Volume Fe/Cu Iron
Slide 32: Los Colorados expansion
Los Colorados expansion Investment : 500 MUS$ • Brownfield Production: 4 Mt/y of fines Stage: Basic engineering Resources Volume Fe 2012 [Mt] [%] Measured 694 31.5 Actual final pit Indicated 343 31.4 Inferred 100 33.9 SIMBOLOGY Actual level TOTAL 1,137 31.7 Final pit Final pit 2008 with expansion Fi
Slide 33: Sustainable mining operations
Sustainable mining operations Totoralillo Port Desalination Plant Phase 3 under discussion S/S Totoralillo with Pucobre: up to 130 l/s S/S CNN CNN Photovoltaic Plant Amanecer Solar CAP CNN Aqueduct 120 lt/s CAP transmission line Copiapó Cardones node Tierra Amarilla Aqueduct Caserones 170 lt/s Magne
Slide 34: Desalination plant
Desalination plant cAP
Slide 35: Ports
Ports Total capacity CAP ports: 34.8 Mt/y Punta Totoralillo: Guayacán: • 29 km north of Caldera • Herradura bay, Coquimbo • Iron ore shipping • Iron ore shipping • 200,000 dwt • 165,000 dwt • Max capacity: 12 million t/y • Max capacity: 6 million t/y • Efective utilization: 4.5 million t/y • Efectiv
Slide 36: Ports – Services to third parties
Ports– Services to third parties CAP Mining Totoralillo Port • Third-party iron ore loading and storage capacity at Totoralillo port is 3 Mt/y • Loaded tonnages: 2 Mt in 2013 and 2,5 Mt in 2014 • EBITDA generation: MUS$20 in 2013 and MUS$22 in 2014 • With the addition of 1 Mt/y of copper loading ser
Slide 37: Solar energy
Solar energy Totoralillo Port Desalination Plant S/S Totoralillo S/S CNN CNN Photovoltaic Plant Amanecer Solar CAP CNN Aqueduct 120 lt/s CAP transmission line Copiapó Cardones node Tierra Amarilla Aqueduct Caserones 170 lt/s Magnetite Plant 80 lt/s 36
Slide 38: Solar energy
Solar energy • 100 MW Photovoltaic power plant fully committed to CAP (PPA) • Located nearby CNN Mine • CAP retains call option for up to 40% of the equity • Financial hedge • Compliance with NCRE law • Connected to a 142 km long 220 kv transmission line owned by CAP General view of the “Amanecer So
Slide 39: Agenda
Agenda Agenda 38
Slide 40: Summary
Summary • CAP Mining • On track for expansion of 50% production capacity to 18 Mt/y • Ample portfolio of future prospects based on abundant reserves; further expansion to be defined in 2014 • Global environmental and economic constraints support the growing need for CAP´s magnetite concentrate • CAP
Slide 41: Final remarks
Final remarks • CAP is advancing through sustainable development based on competitive advantages • Concurrently, cost reduction initiatives and productivity improvements will be at the center of management efforts • CAP Mining: operational improvements • CAP Steel: optimize raw materials and energy
Slide 42: CAP Group Update - Deutsche Bank 4th Annual Chile Conference
CAP GROUP UPDATE Deutsche Bank 4th Annual Chile Conference Fernando Reitich President & CEO Raúl Gamonal CFO London - May 2014
CAP — Deutsche Bank 4th Annual Chile Conference (May 2014) on 6ix